Suppose the demand for pickles on The Citadel is Qd=500-4P, and the supply is Qs=6P. Assume this market is perfectly competitive. d. Suppose the Council puts a tax of $5 per unit on the purchase of pickles. Write an equation showing the relationship between the price paid by consumers and the price received by producers. e. Find the new (after-tax) equilibrium quantity of pickles, price paid by consumers, and price received by producers. f. How much consumer surplus is created by this market after the tax? How much producer surplus?
Suppose the demand for pickles on The Citadel is Qd=500-4P, and the supply is Qs=6P. Assume this market is perfectly competitive. d. Suppose the Council puts a tax of $5 per unit on the purchase of pickles. Write an equation showing the relationship between the price paid by consumers and the price received by producers. e. Find the new (after-tax) equilibrium quantity of pickles, price paid by consumers, and price received by producers. f. How much consumer surplus is created by this market after the tax? How much producer surplus?
Chapter4: Markets In Action
Section: Chapter Questions
Problem 6SQ
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Suppose the demand for pickles on The Citadel is Qd=500-4P, and the supply is Qs=6P. Assume this market is
d. Suppose the Council puts a tax of $5 per unit on the purchase of pickles. Write an equation showing the relationship between the price paid by consumers and the price received by producers.
e. Find the new (after-tax)
f. How much consumer surplus is created by this market after the tax? How much
g. How much tax revenue is generated by this tax? How much
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